Debt Counsellors Can Help Consolidate Your Debts
Debt counsellors work with a variety of individuals at all stages of debt
. For some people, debt consolidation is the right path to take to help reduce debt and make monthly payments more manageable. There are pros and cons of every method of debt management, so your counsellor will consult with you on all of the options available. Only you know if the suggested methods are right for your situation, although the counsellor will recommend the debt management solution that has the least disadvantages for your situation.
What Is Debt Consolidation?
Typically people go into debt on unsecured loans. These are credit cards or store cards that typically have high interest rates and can snowball out of control. Your counsellor will work to renegotiate these debts if they can, but sometimes converting these into secured debts is more feasible. An example of a secured debt is a mortgage payment. And many times the unsecured debts are secured in the form of a mortgage against the house. The house serves as collateral and often gives you a much lower interest rate than your unsecured loans. Vehicles can also be used as collateral for a secure loan and allow you to receive a lower interest rate. The lower interest rate automatically lowers the monthly payment, allowing you to pay the debt off sooner.
What are some Advantages and Disadvantages of Consolidations?
Debt counsellors will discuss all of the pros and cons of debt consolidation with you. But some of the advantages include being able to make one low monthly payment, having a lower interest rate, avoiding having to pay numerous creditors, and being able to turn unsecured loans into secured loans. The one monthly payment is usually negotiated to be affordable for you and is accompanied by a low interest rate. The hope is that this will allow the debtor to pay off their debts in a shorter time and start living a debt-free life.
Some of the disadvantages include the risk that your credit will be affected, you will have a longer repayment period, and that there may be additional fees offered by the debt management company for consolidating your debts for you. Most people who partake of debt consolidation aren't too affected by the credit change because the counsellor will suggest backing away from using credit for a number of years until all debts are paid off. The longer repayment period may be inconvenient, but some individuals might find that the smaller amount is manageable and at least allows them to be relieved of debt eventually. No matter which avenue the debt counsellors recommend, seeking help is the first step in getting your debt under control.
Debt Counsellors Can Help Consolidate Your Debts
By: Chris Jenkinson
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